Deal or No Deal? The High-Stakes Game of Contesting a Will with a No-Contest Provision Under the 1975 Act

In Sim v Pimlott and others [2023] EWHC 2296 (Ch), the High Court considered the efficacy of "no-contest clauses" in the context of proceedings under the Inheritance (Provision for Family and Dependants) Act 1975 (the "1975 Act”). No contest clauses (sometimes referred to by their Latin tag "in terrorem clauses") are designed to heavily disincentivise beneficiaries from challenging a will or a trust, often by removing their benefits if they make an unsuccessful challenge.

In summary, the Court determined that: (i) where a will made reasonable financial provision for a dependent then the inclusion of a no-contest clause would be reasonable; and (ii) it would be wrong, in principle, for a dependent to pursue a claim which they know would result in the forfeiture of their benefit under the will (due to a no-contest clause) and then argue that the will did not provide reasonable financial provision because they had foregone the benefit.

Hussein Mithani, an associate in our disputes and private wealth team, considers the decision in more detail below.

The 1975 Act (in brief)

Under the 1975 Act, the Court has the power to vary the distribution of benefit in respect of a deceased's estate (ie change who gets what under a will or intestacy). This power is limited as it can only be applied to those who qualify under the 1975 Act (broadly certain family members and others dependent on the deceased at the time of the deceased's death) and can only be to provide reasonable financial provision for these dependents. Those who apply to the Court for such a remedy must demonstrate that the provision actually made in the will is not reasonable.

There is a whole host of academic commentary and case law on what amounts to "reasonable financial provision". However, for the purposes of this article, it is only relevant to highlight that: (i) reasonable financial provision is generally as maintenance at "neither a luxurious nor poverty-stricken level"; and (ii) if the applicant is a surviving spouse or civil partner of the deceased, they can claim at a higher maintenance standard which can take into account the standard and style of living and reasonable expectations of the applicant.

What is a no-contest clause?

A no-contest clause (also known as a forfeiture clause) is a clause in a will which might commonly state that a beneficiary will lose their entitlement to an asset or assets under a will if they decide to challenge the will.

The purpose of such a clause is to discourage beneficiaries from challenging the will or making applications under the 1975 Act. In the context of the 1975 Act, a no-contest clause will be deemed to take effect whether a challenge succeeds or fails unless the clause itself states otherwise.

Background

The proceedings concerned the estate of Dr Sim (the "Deceased"). The Deceased was a former GP who passed away on 16 January 2018 and left a net estate of some £1.2 million. The claim was brought by Valerie Sim (the "Claimant") who was the spouse of the Deceased for nearly 20 years. The defendants to the claim were the various children and grandchildren of the Deceased.

The circumstances of this case are somewhat unusual. At the time of the Deceased's death there were divorce proceedings pending between the Deceased and the Claimant and the Claimant had also sought non-molestation and occupation orders against the Deceased. It is also relevant to note that in respect of the divorce and non-molestation proceedings the Claimant made a number of serious allegations about the Deceased which included domestic abuse and sexual violence.

In the Deceased's will he included a no-contest clause where the Claimant would be provided: (i) £250,000 if she released any rights to a claim under the 1975 Act (amongst other conditions); and (ii) £125,000 if she released her interest in a property owned in Dubai. The Deceased's will stated that the residue of his estate would be held on trust and that the Claimant would be entitled to the income generated on the residue during her lifetime (subject to the exercise of a power of appointment).

The Claimant did not release any rights to claims under the 1975 Act, nor did she release her interest in the Dubai property. Instead, she brought proceedings under the 1975 Act alleging the Deceased's will did not make adequate financial provision for her in light of the length of their relationship and the abuse she allegedly suffered from the Deceased and from a number of his children.

Judgment

The Judge reiterated that the question to ask was whether the sums of money (subject to the no-contest clause) and the income of the interest of the residue of the estate provided for the Claimant under the will amounted to reasonable financial provision.

The Judge concluded that it did amount to reasonable financial provision when considering the facts and "unusual" circumstances. In this regard, the Judge looked at the relevant factors under the 1975 Act but focused on the length of the relationship between the Claimant and the Deceased and the conduct of the Claimant. In respect of conduct, the Judge was heavily critical of the Claimant and held that: (i) he could not accept the Claimant's allegations in respect of domestic abuse and sexual violence; (ii) the Claimant decided not to care for the Deceased or have him at home in his final months; (iii) the Claimant "made distressing, and unwarranted, accusations against [the Deceased's] children, with the sole exception of the fifth defendant…";  and (iv) the Claimant's conduct towards the Deceased towards the end of his life was "simply unwarranted, and wholly unacceptable" as well as "…deeply hurtful and offensive, and a complete fabrication, involving vague and spurious allegations." When considering the 1975 Act factors, the Judge also considered a hypothetical divorce. However, in this regard he stated that if she complied with the no-contest clause she would have had the opportunity of receiving £375,000 in addition to a life interest in the residue of the estate (after payment of the legacies and the costs of administration) as well as the Deceased's NHS pension (at £2,000 a month) and considered this amount would have been sufficient under the 1975 Act taking into account all the factors.

Having concluded that the will provided the Claimant with reasonable financial provision, the Judge then turned to whether it was reasonable for the Deceased to include the conditions attaching to the two payments. The Judge held that it was reasonable. In coming to this conclusion, the Judge stated that where the actual provision made by the will is objectively reasonable it is also reasonable to include a provision intended to discourage the relevant beneficiary from embarking upon "an unwarranted claim under the 1975 Act, with all the consequent delay to the administration of the estate, and accompanying delay in the distribution of assets to beneficiaries, and, in addition, with all the costs associated with defending such a claim."

Having determined that the conditions in the will were reasonable, the Judge confirmed that by having brought this claim the Claimant forfeited her right to the two cash amounts and her only interest under the will was the life interest. In this respect, the Judge stated that it would be wrong in principle for a beneficiary to pursue a claim knowing that in doing so, "they would forego a certain benefit, and then to say that, because they have foregone that benefit, the will failed to make reasonable financial provision for that beneficiary".

In assessing whether the life interest provided the Claimant with reasonable financial provision, the Judge found that it would leave the Claimant homeless as she would not have access to any capital or other cash assets. In this regard, the Judge found that it was entirely reasonable to include a no-contest provision which stated that the Claimant would have an option to take a capital sum and, if she failed to comply with that provision then that capital sum would not be available to her. However, the Judge found there was unreasonable financial provision in one respect in these particular circumstances. This was the failure to include provision that the Claimant could require part of the capital to which her life interest attached to be applied in the purchase of a home for her in the event she did not comply with the no-contest clause. Consequently, the Judge ordered a variation of the trust to require the trustees to set-aside a capital sum so that the Claimant could purchase and occupy a property.

Comment

It is hard to be 100% certain in advance whether or not a no-contest clause will be upheld by a Court. However, one of their benefits is precisely the jeopardy this creates.

The decision, whilst heavily fact dependant, sets out the need for litigants to carefully examine the merits of a claim under the 1975 Act. In particular, litigants must have regard to any no-contest clause and decide whether it is worth the risk to bring a claim knowing that they could lose out on the amounts offered in the will.

It is also worth noting that Judges may be more critical of claimants who bring 1975 Act claims where such no-contest clauses are in place. In this case the Judge noted that the Deceased's grandchildren had to wait a number of years to receive their legacies under the will and that the costs of litigation had eaten up the funds of the estate. The Judge also made a number of adverse findings against the Claimant in respect of her honesty and credibility. Further, it should be reiterated that if a claimant is unsuccessful in challenging the no-contest clause then the Judge may well make an adverse costs order (as they did in the present case).